Gold loan rate per gram: How does it affect your gold loan?

A gold loan helps raise quick capital from NBFCs and banks. However, before applying, borrowers must be aware of how the gold loan rate per gram affects the loan amount they receive. Gold loans are a great source for obtaining funds during an emergency or for other needs. Lenders offer a certain percentage of the loan value depending on the current gold loan rate per gram.

Hence, individuals should know the gold loan per gram rate and the other aspects of this secured credit instrument. Continue reading this article to make an informed decision. 

What is gold loan rate per gram?

In India, majority of lenders sanction loans equal to 75% of the gold’s total market value. The amount of credit available for each gram of pledged gold is calculated and displayed by lenders using the terms “gold loan per gram” or “gold loan rate per gram.”

Gold loan amount per gram depends on several factors because the loan amount is based on the weight and quality of gold. The gold loan rate per gram will increase with increasing weight and quality since the gold will be worth more.

Role of gold per gram rate

The loan amount that any lender offers an applicant after determining the current value of gold articles is known as the loan-to-value ratio. Loan-To-Value ratio, which depends on the price of gold per gram, is a major factor influencing a gold loan application. The Reserve Bank of India currently permits an LTV ratio of 75% for all lenders. The rate per gram directly impacts the gold loan and the amount a lender will offer. This is because the current value of gold determines the gold loan amount on the domestic market. 

Suppose a person has gold jewellery that is worth Rs. 5,00,000 after evaluation using the current per-gram gold loan rate. According to the LTV ratio, a lender can offer 75% of the maximum loan amount of Rs. 3,75,000.

However, the price of gold will increase with the market rate of gold per gram. The lender will give Rs. 3,90,000 depending on the LTV ratio for the same gold, which is currently worth Rs. 5,20,000. This shows how gold loan rate per gram affects a gold loan amount. 

What are the factors that affect the gold loan rate per gram?

The cost of gold is dynamic and frequently changes. Since prices directly affect gold loan rate per gram today or any other day, it is crucial to keep an eye on them. Nevertheless, a variety of factors indirectly impact gold loan rates per gram as well as gold prices. These factors are as follows: 

  • Demand and supply 

When there is more demand than supply for gold, the price of gold rises. Similarly, the worth of gold falls when supply exceeds the demand. One can be eligible for a larger gold loan because the worth of this metal will increase with an increase in gold price. If the gold price on the market falls, amount of a gold loan will reduce.

  • Financial situation

Investors prefer to purchase gold physically or online amid inflation, recession, etc., because it is a tradable product. When the value of other asset classes declines, investors tend to invest in commodities like gold because these adverse economic circumstances produce a bearish feeling in the stock markets. Due to an increase in demand for gold, borrowers will be able to obtain a greater per-gram value for their gold with a larger loan amount.

  • Rates of interest

The Reserve Bank of India controls the flow of money in market by raising or lowering interest rates, including repo rate and reverse repo rate. The price of gold and potential loan amount one could receive for gold are both impacted by current interest rates.

These interest rates and domestic gold prices are inversely related. When interest rates drop, more people choose to purchase gold, driving up demand and prices.

Gold was the first option for those looking to make safe investments after the pandemic. This led to a rise in the value of gold. Individuals applying for a gold loan in Raipur or any other city must keep the above-mentioned pointers in mind and make an informed decision accordingly. Knowing gold loan rate per gram will allow applicants to determine the loan amount they are eligible for.